Stocks and a Government Shutdown - January 22, 2019

Posted By Loveless Wealth Management LLC on 22 January 2019

The partial government shutdown entered its 27th day last Friday. It is the longest on record. Essential services continue, there is a no interruption in Social Security checks, but people are affected. There’s been no shortage of stories of federal workers who are either furloughed without pay or are working without pay.

But, what about the historical impact of a shutdown on stocks. The table below highlights the impact.

Short term, we have seen minor weakness, at least in some cases. Longer-term, investors have focused on the economic fundamentals. When the shutdown ends, it fades from view.

Though the latest closure is the longest on record, investors are brushing aside multiple headlines. Instead, a respectable start to Q4 earnings season, cautiously optimistic headlines about a China trade deal, and a more flexible Federal Reserve have supported the major indexes.

The longer the government shutdown drags on, the greater potential economic impact. But estimates vary, and investors aren’t expressing much concern at this point.

They may be expecting a near-term resolution, or investors generally look past a one-time boost or hit to economic growth because it’s not expected to be an ongoing event.